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Tariffs on Hundreds of IT Products to be Lowered or Eliminated Soon

Thursday, June 30, 2016
Sandler, Travis & Rosenberg Trade Report

Traders will soon see lower costs on information technology goods when the first tariff cuts under the World Trade Organization’s expanded Information Technology Agreement take effect.

The expanded ITA covers 201 information and communications technology products (see full list below) that have an annual global trade value of more than $1.3 trillion and are currently subject to tariffs of up to 35 percent. Covered goods include multi-component semiconductors (MCOs), medical equipment, GPS devices, tools for manufacturing printed circuits, video game consoles, printer ink cartridges, static converters and inductors, loudspeakers, software media (e.g., solid state drives), point-of-sale cards to download software and games, LEDs, touch-sensitive input devices, children’s electronic learning devices, and various information and communications technology testing instruments. Only about a third of the WTO’s members have signed the agreement, which binds them to provide duty-free access to their markets for the affected goods for all 162 WTO members.

Tariffs on about two-thirds of the tariff lines covered by the expanded ITA are set to be eliminated as of July 1. In the U.S. this change will require a presidential proclamation to take effect. No such proclamation had been issued at press time, and if it is not issued by July 1 it will most likely have retroactive effect when it is issued. Most of the remaining tariffs will be phased out in annual stages through July 1, 2019, though some will not be fully eliminated for five or even seven years. Tariff elimination schedules vary by country and China will phase out its tariffs more slowly than others.

Companies dealing in covered goods can take several steps to take advantage of the expanded ITA. Internal systems should be updated based on the duty reduction schedules of the countries in which covered items are sourced (see below for U.S. schedule, which could ultimately be modified in the proclamation). Existing and anticipated product lines should be reviewed to confirm which will benefit from duty-free treatment. Binding rulings may be sought if there are questions as to whether a particular product is covered, noting that differences of opinion on the scope of the goods falling into the designated tariff provisions are likely to arise both within and outside the U.S. These steps should be repeated in each source country participating in the expanded ITA given likely variances in tariff language, tariff interpretation and duty reduction schedules. 

In conducting these evaluations it should be noted that while the United Kingdom’s eventual withdrawal from the European Union may impact how the expanded ITA is applied to goods entering the UK, until withdrawal is complete the UK will remain a part of the EU and apply the EU tariff schedule, which will incorporate the expanded ITA provisions based on its staging schedule. (Visit our Brexit Information Hub for news and information about the trade impacts of the UK withdrawal from the EU.)

For more information about, or assistance with, the expanded ITA, please contact Deb Stern at (305) 894-1007.

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